Pfizer 2009 Annual Report Download - page 64

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
6. Other (Income)/Deductions—Net
The components of Other (income)/deductions—net follow:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007
Interest income $ (746) $(1,288) $(1,496)
Interest expense 1,233 516 397
Net interest (income)/expense(a) 487 (772) (1,099)
Royalty-related income(b) (243) (673) (224)
Net gain on asset disposals(c) (188) (14) (326)
Legal matters, net(d) 234 3,300 46
Gain related to ViiV(e) (482) ——
Asset impairment and other associated charges(f) 417 143 28
Other, net 67 48 (184)
Other (income)/deductions—net $ 292 $ 2,032 $(1,759)
(a) Net interest expense was $487 million in 2009 compared to net interest income of $772 million in 2008. Interest expense increased in 2009 due to
our issuance of $13.5 billion of senior unsecured notes on March 24, 2009 and approximately $10.5 billion of senior unsecured notes on June 3,
2009, of which virtually all of the proceeds were used to partially finance the Wyeth acquisition (see Note 2. Acquisition of Wyeth). Interest income
decreased in 2009 due to lower interest rates, partially offset by higher average cash balances. The decrease in net interest income in 2008
compared to 2007 was due primarily to lower net financial assets and lower interest rates during 2008 compared to 2007. Capitalized interest
expense totaled $34 million in 2009, $46 million in 2008 and $43 million in 2007.
(b) In 2008, includes $425 million related to the sale of certain royalty rights.
(c) In 2009, primarily represents gains on sales of certain equity investments. In 2007, included a gain of $211 million related to the sale of a building in
Korea. Net gains also include realized gains and losses on sales of available-for-sale securities: In 2009, 2008 and 2007, gross realized gains were
$186 million, $20 million and $8 million, respectively. In 2009, gross realized losses were $43 million and none in both 2008 and 2007. Proceeds
from the sale of available-for-sale securities were $27.0 billion in 2009, $2.2 billion in 2008 and $663 million in 2007.
(d) In 2008, primarily includes charges of $2.3 billion related to the resolution of certain investigations concerning Bextra and various other products,
and charges of $900 million related to our agreements and our agreements-in-principle to resolve certain litigation and claims involving our
non-steroidal anti-inflammatory (NSAID) pain medicines (see Note 3C. Other Significant Transactions and Events: Bextra and Certain Other
Investigations, and Note 3D. Other Significant Transactions and Events: Certain Product Litigation—Celebrex and Bextra).
(e) Represents a gain related to ViiV, a new equity method investment, which is focused solely on research, development and commercialization of HIV
medicines (see Note 3A. Other Significant Transactions and Events: Formation of ViiV, an Equity-Method Investment).
(f) 2009 amounts primarily represent asset impairment charges associated with certain materials used in our research and development activities that
are no longer considered recoverable. 2008 amounts primarily represent charges related to impairment of certain equity investments and the exit of
our Exubera product (see Note 12. Goodwill and Other Intangible Assets).
7. Taxes on Income
A. Taxes on Income
Income from continuing operations before provision for taxes on income, and income attributable to noncontrolling interests consist
of the following:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007
United States $ (3,632) $ (1,760) $ 242
International 14,459 11,454 9,036
Total income from continuing operations before provision for taxes on income $10,827 $ 9,694 $ 9,278
The decrease in domestic income from continuing operations before taxes in 2009 compared to 2008 was due primarily to an
increase in certain expenses incurred in connection with the Wyeth acquisition, which was partially offset by the non-recurrence of
charges of $2.3 billion recorded in 2008 resulting from an agreement-in-principle with the DOJ to resolve the previously reported
investigations regarding past off-label promotional practices concerning Bextra and certain other investigations, as well as other
litigation-related charges recorded in 2008 of approximately $900 million associated with the resolution of certain litigation involving
our NSAID pain medicines. The decrease in domestic income from continuing operations before taxes in 2008 compared to 2007
was due primarily to the aforementioned charges and an increase in restructuring charges in 2008 compared to 2007, partially offset
by the charges associated with Exubera in 2007. The increase in international income from continuing operations before taxes in
2009 compared to 2008 was due primarily to the gain in connection with the formation of ViiV, the decrease in international
restructuring charges and the non-recurrence of acquired IPR&D, partially offset by an increase in amortization expenses incurred in
connection with the Wyeth acquisition. The increase in international income from continuing operations before taxes in 2008
compared to 2007 was due primarily to the charges associated with Exubera in 2007. For additional information on all of these
charges, see Note 3. Other Significant Transactions and Events.
62 2009 Financial Report